Sustainability: tips on measuring materiality for SMEs

Understanding materiality – what matters most – is the key to finding your sustainability focus

You’re thinking about embarking on a programme of change to improve sustainability in your SME. You’ve read our blog on setting sustainability goals but you’re still unsure where to focus your efforts.

It’s a conundrum that lots of businesses find themselves struggling with. Sometimes, that’s because there’s just so much to go at that they get overwhelmed, sometimes it’s the opposite and they just can’t seem to see anything they think is worth changing.

So, what should you focus on?

The things that matter most

Pick the the things that matter most (a) to the success of your business and (b) to society and the environment around you. Focus on making a difference.

Forget everything else (for now) and don’t be tempted to just copy what others are doing – there may well be a good reason why it works for them but won’t work for you.

Here’s an example.

We asked the management of a heavy goods haulage company with a sizeable fleet how concerned it is about global over-consumption of natural resources; it said it wasn’t especially concerned. We asked about the extent to which global over-consumption of natural resources could negatively impact the business and its ability to trade; it said probably not a lot. We asked whether global over-consumption of natural resources might present it with an opportunity to carve out a competitive advantage; it said it didn’t see how.

In short, this particular company didn’t see the global over-consumption of natural resources as having a big impact on its operations. It thought it could just carry on doing business as usual.

So, we pointed out that oil is a natural resource and that the diesel it runs its fleet on is derived from oil. We showed how supply and demand affects the price of oil and it’s derivatives, and that squeezed OPEC production has historically resulted in higher prices at the pump – and how it’s reasonable to assume that over-consumption leading to diminished supplies of oil could affect a haulage business quite significantly. And we explored how a switch to vehicles that run on biogas produced from fermenting food waste could help cushion it from those impacts on world oil markets.

It’s safe to say that it now sees how the global over-consumption of natural resources could directly impact its business and its ability to continue operating. It can also see the advantages of switching some (and maybe, eventually, all) of its fleet to run on biogas.

Anything that has the ability to affect your business to such an extent like this is of material importance; that’s what we mean when we talk about materiality – it means it really matters.

When it came to sustainability though, the haulage company was more concerned about recycling office paper. It’s focus was entirely wrong.

By seeking ways to limit its fuel consumption, not only can it mitigate against rising costs linked to future oil shortages but it can also deliver a win for the environment (lower CO2 emissions) and society (improvements to air quality).

Judging what matters most

When it comes to working out what is and isn’t material to a business, it’s often a judgement call; there’s no simple formula that you can use because businesses are so unique.

To figure out what matters most in your business when it comes to sustainability, consider:

– could it negatively impact my business by significantly increasing costs, denting profits, or losing me customers? If the answer is ‘yes’, consider it to be of material importance

– could it have a significant, adverse impact on people employed by the business or that live nearby? If the answer is ‘yes’, consider it to be of material importance

Remember that different stakeholders will have different perceptions of what is and isn’t material to them and so it’s a good idea to explore their views and then use that to shape your materiality assessment. You can do this with a simple online survey tool, asking staff and colleagues, suppliers, customers, investors and even regulators. The responses you receive will be rich in insights that you can then use to judge what matters most.

And armed with that knowledge, you’re much better placed to begin developing and progressing towards your long-term sustainability targets.

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